[With Adv. Dave Wolf]
The upcoming U.S. elections pose some serious tax challenges not only for millions of U.S. taxpayers who live in the U.S but also for hundreds of thousands of them who live in Israel or have family or assets in Israel.
Joe Biden announced to undo some of the tax regulations introduced by the Trump Administration through the Tax Cuts and Jobs Act of 2017 if he is elected. Under Biden, high-income taxpayers will see both an increase in individual taxes and a reduction of the current gifts and estate tax exemptions.
Here are some of the key points in Joe Biden’s proposed tax policy:
Overall, the Democratic tax plan suggests a significantly increased tax on your wealth, both as an individual and business.
So what should you do if you are an American taxpayer and live in Israel or you live in the U.S and have family in Israel or Israeli assets and want to avoid the possibility of having to pay suddenly much more taxes, either alive or upon death?
One of the solutions that work both in the USA and Israel is creating a trust. The exact details of creating and the workings of this structure would be too detailed for this article, but basically, the settlor (the person who owns the assets) will fund the trust with his or her assets. These assets can be shares, stocks, bonds, private equity, real estate, art, anything of value. The trust will be managed by a trustee according to the settlor's instructions, and the assets will subsequently be transferred to the beneficiaries. The trustee can be overseen by a Protector.
Under the above solution, the beneficiaries will receive the assets without any tax due, and no inheritance tax is due by the settlor with minimum or no tax to be paid upon creating the trust for the settlor. In addition, the trust creates asset protection and an easy way to manage assets in the case of multiple assets and beneficiaries.
The current Tax Cuts and Jobs Act is an opportunity not to be missed, and transferring assets to a well-structured dual U.S. and Israel compliant trust presents a chance to secure your assets safely and efficiently. Minimizing losses is a critical detail to act on with the upcoming election.
However, time is of the essence, and any trust structure must be in place before December 31, 2020.